Advising On Pension Transfers

​This article has been taken from Bankhall's July 2020 Compliance Bulletin, our monthly roundup of all things regulation. To find out more about how you could receive insights like this and more straight to your inbox, contact our Business Solutions team by emailing [email protected]

The Financial Conduct Authority (FCA) has now published three policy statements over the last three years which relate to pension transfer advice:

PS18/6 | Advising On Pension Transfers

Replaced the transfer value analysis TVAS requirement with the appropriate pension transfer analysis (APTA) and transfer value comparator (TVC).

PS18/20 | Improving The Quality Of Pension Transfer Advice

Raised qualification requirements for Pension Transfer Specialist and provided guidance on ‘triage services’ and the advice boundary.

PS20/6 | Pension Transfer Advice: Feedback On CP19/25 And Our Final Rules And Guidance

Issued most recently, this policy statement banned contingent charging for defined benefit (DB) advice and requires firms to give more consideration to workplace pension schemes where a transfer is considered appropriate.

Key points

Now, the guidance consultation paper GC20/1: Advising On Pension Transfers covers a wide variety of topics spanning guidance on systems and controls to guidance on the DB advice process itself and the standards the FCA expects of firms when giving advice.

In terms of advisory issues, the draft guidance highlights the level of information firms are expected to gather when giving DB transfer advice, particularly regarding identifying customer objectives, retirement income needs, and attitude to and understanding of the risk associated with transferring out of a DB scheme.

In particular, the guidance highlights common failings such as citing feature of pension flexibility as objectives and also the use of ‘leading’ questions as issues that can lead to negative outcomes.

GC20/1 also provides practical guidance around the APTA, and the FCA’s expectations regarding issues such as death benefits, ‘high’ transfer values, scheme funding, cashflow modelling, early retirement, and alternatives to meeting customer objectives.

Next steps and actions

We have not attempted to summarise all of the information contained in GC20/1 as the aim of the guidance consultation is to provide plain-English guidance and a clarification of the FCA’s existing expectations, rather than set out any new rules.

So if you provide pension transfer advice, we would strongly suggest you take time to read GC20/1 in full. Bankhall clients may also wish to refer to Bankhall’s Guide to DB Transfers which can be found in the Compliance Document Library of Bankhall Online, and aims to provide guidance on the key suitability considerations.

The consultation period ends on 4 September 2020 and the FCA will then consider the feedback and publish Finalised Guidance in the first quarter of 2021. In our Regulatory Analysis we have sought to draw out some of the key points and good/poor practices the FCA have highlighted, which we think will be of most interest to firms. Bankhall Regulatory Analysis (RA00187-20) can be accessed on Bankhall Online.

Get support with pension transfer advice

If you’d like to discuss the latest guidance on pension transfer advice in more detail, or to find out more about how you could benefit from the support that’s available to you from Bankhall in this area, contact the experts in Bankhall’s Business Solutions team by emailing [email protected]

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